CIC on 60 Minutes

This morning I got an email from a loyal reader about the 60 Minutes article that aired last night, China Investment An Open Book? The video and transcript are available at that link. The focus of the story is an interview with Gao Xiqing, President of the China Investment Corporation (CIC).

Before I started typing away I decided to check what else was out there. Rich Brubaker at All Roads Lead to China has a post up, 60 Minutes Report: China’s Sovereign Wealth Fund. Mr. Brubaker gives a nice summary of the material covered in the article, but I disagree with his perceptions of the piece:

In the end, it is clear to me that 60 minutes has decided to take a protectionist stance, and I cannot tell you how disappointed I am in Ms. Stahl and her implications that China is suspect of anything. The fact is that the US would not need these investments were its own fiscal house were in order. Perhaps Ms. Stahl and the rest of the US would be happier if it were another country making the investments, but perhaps it would be better not to create the financial mess that is currently the US economy in the first place?

This was not clear to me, and it was not clear to the reader who emailed me this morning who thought:

They touched heavily upon the fear the U.S. has of China taking us over financially. The guy [Gao Xiqing] comes off great - it should calm some feathers.

There is always a reason behind these 60 Minute stories, and Lawrence Summers touched on the reason for this particular story near the middle:

[I]n a way, their willingness to be interviewed and go on your show is probably not something they would do if they thought of themselves as having some nefarious purpose.

60 Minutes is a show that has a large middle-aged and older viewers. This is the most dense voting bloc in the US, and their opinion matters a lot. Surely, part of Mr. Gao's motive in the interview was to show the U.S. that they do not need to be afraid of CIC in particular and China in general. Nothing too tricky, and it would be hard to miss. He even said that his motive was to dispel fears.

Gao Xiqing did come off great. He was calm, charismatic, well-spoken, and genuine. And, he competently painted CIC's motives as wholly economic. By contrast, career China hawk Peter Navarro came off as a lunatic in the video. He was talking too loudly and too quickly, and the words coming out of his mouth made little sense. Lesley Stahl even suggested as much in the following exchange:

"China has so much money that they can spend buying U.S. companies that the danger is that they can strip these companies," Navarro said. "They can strip the companies of jobs, research and development, technology."

"Do we have any evidence, any reason to believe that they’re really going to do that?" Stahl asked.

"It’s not a clear and present danger," Navarro said. "It’s a clear and future danger."

Read: No, there is no evidence, but, but, but look at the "pattern of behavior." If there are people who have already been convinced by this argument, then they're not going to change their mind. But for those undecided on CIC, I think Mr. Gao did a lot to brighten CIC's financial motives, and I think that in the end Lesley Stahl came off as against Navarro, and more towards Gao. I hope much of America saw the same.




A thought I had while watching: If China actually used these companies for political purposes then they'd need directors, officers, or large enough shareholdings to owe fiduciary duties. If they acted in the best interest of China rather than the company, they'd be the targets of some substantial shareholder derivative suits.

Just quick comment: I don't know that the promise to operate CIC as transparently as The Government Pension Fund of Norway, but Mr. Gao now has a standard of conduct that he has pledged to in the news.